Need savings advice/priorities (Rich people problem B"H

amother ↓

Mon, Aug 05 2013, 5:58 pm

B"H we do very well financially. If this will make you feel bad I understand, and I have been there. Stop reading, I don't mean to make you feel bad.

Still there? Ok. I have asked financial planners but I haven't been happy with their advice.

After expenses we have about 13K left over per month. We are saving towards a new house in a VERY expensive neighborhood where we will need about 400K to put down. (DON'T ASK-- I know this sounds INSANE!!)

So far we have been saving 2K towards retirement, 10K towards the new house, and paying an extra 1K on another property we own.

Here is my question:
1. The other property we own has NO equity (bought at the height of the market) AND has an adjustable mortgage which NOW is super low. We were rejected for a modification because of the lack of equity. We do have renters that cover the mortgage and have been throwing an extra $1000 at it every month to try and make a dent. But, it is SO underwater that I am not sure if this is wise.

2. I am concerned we are not saving enough towards retirement. 2K a month in 401Ks and we do not qualify for a Roth (income too high). What should we do? Save less for the new house?

We are currently renting a property because the old property is in a neighborhood we don't want to live in and a new property here is $$$$$$$ and we are still in savings mode.

What do you think.

causemommysaid ↓

Mon, Aug 05 2013, 6:11 pm

maybe this is bad advice but can you get rid of the old property? Even if you lose a little money on it?

What about taking time off from saving in other areas and just paying off the original mortgage?

Or Do you think the bank might accept a short sale?

Barbara

Mon, Aug 05 2013, 6:29 pm

Honestly? I think that you need to speak with a financial adviser.

You have $156,000 a year in disposable income to put into savings, whether saving for a house, retirement, or whatever. You shouldn't be relying upon a bunch of anonymous women to tell you what to do with that kind of money.

But if you want to rely on anonymous people, I suggest that you read up on closing costs and mortgage fees wherever you live, because it sounds like you have vastly underestimated the amount of savings you will need, given the costs of title insurance, mortgage tax, etc, which could easily total tens of thousands of dollars more.

Oh, and max out your 401(K)s.

imasinger

Mon, Aug 05 2013, 8:02 pm

IMO, funds for kids' future education and your retirement take priority over fancy homes that may join your first purchase in underwater land if the housing bubble bursts.

Conventional wisdom is that you should put away 10-15% of your gross income towards retirement, so you are right that 2K is low. Is it so terrible to wait longer or buy something less expensive to live in?

Yes, find a financial advisor you like and trust. It may also be helpful to read online blogs or financial advisory magazines like "Money."

You should continue to have good parnassah and use it wisely and productively.

mirror

Mon, Aug 05 2013, 9:38 pm

imasinger wrote:

IMO, funds for kids' future education...

Not just education, but possibly a down payment for their future homes, and living expenses for the first two years of marriage.

And if you have additional money after your retirement, etc and kids' future, then how about tuition for all your grandchildren, G-d Willing? And what about college funds for your grandchildren?

The list goes on...

And if you still have $$$ left over, you can pm me and I'll be more than happy to give you my bank account information so you can deposit it directly into my account. Wink

↑ amother ↓

Tue, Aug 06 2013, 8:28 am

The money spent on your primary residence is not the same as an investment.
I agree with all of the previous posters, about getting a good financial planner that you know and trust, and also buying a few types of insurance as well, which you did not mention.
May you continue being blessed with parnasa and yiddish nachas!

↑ amother ↓

Tue, Aug 06 2013, 12:39 pm

I have called Rick Edelman, he took 2 months to return the call and then just wanted to sell me tons of stuff.

Dave Ramsey is not my style, although we have no debt and do live within our means, we are not afraid of risk and he would have advised not to start our business (which we started with 100K on credit cards and paid off 6 months later).

The huge down payment is what we were told by our mortgage guy we had to put down on a $1.6 house because of closing costs and moving costs etc-- so I meant $400K toward the house, not exactly down but thats the magic number. We have a large family B"H and live in a high COL neighborhood, the house will be nice but not over the top- we are hoping to find 4 bedrooms, 3-4 bathrooms and a yard and that's the price here.

You guys are smart! I love your input! But, ya I will talk to a financial planner, just have to find one that gets me.

↑ amother ↓

Tue, Aug 06 2013, 12:42 pm

OPINIONATED- we will pay for our kids education IYH, but I am not a proponent of support after marriage (aside from gifts and obviously in a special situation I would). Both our families have $$, but didn't give a dime after marriage and I believe that leads to financial independence.

↑ amother ↓

Tue, Aug 06 2013, 1:18 pm

amother wrote:

You should have mentioned that. You see, your post stated that you were looking a "VERY expensive" homes. $1.6 million doesn't fit in that category, in the grand scheme of things. If you live in New York, its barely more than a condo or row home. But in any case, at $1.6, you're putting down $320,000, and your broker says that closing expenses will only be $80,000? That's on the low end, but maybe. But you haven't thought about the cost of renovations and repairs, painting, refinishing floors, and making sure that you have a cushion for repairs. All told, I'd call it $500,000.

↑ amother ↓

Tue, Aug 06 2013, 2:11 pm

maybe you should think about supporting your kids after marriage. I know many poor families that do it and are so happy to be able to do it. trust me when the cash stops coming the couple is forced to be independent. and I think if you can afford it it would help your childrens marriage a lot at the beginning if they don't need to have financial problems.

a1mom

Tue, Aug 06 2013, 9:45 pm

sounds to me like the second property is a lose lose situation- you should probably sell even if you need to take a bit of a loss unless you really aren't spending any money on the property besides for the rental income, unless its providing you with a tax shelter. Do you have a fully funded six month emergency fund? if yes then socking away max to the 401k's and the rest towards the down payment sounds like a smart idea to me.. the sooner you can start paying your big mortgage as opposed to your current rent the faster you will build equity. However a 1.3 million dollar mortgage is no picnic so I hope you continue to have much hatzlacha with your business, I'd hate to have that weight around my neck if things went sour. Also please make sure that you use a reputable financial planner, someone who can advise you on taxes and the like..

↑ amother ↓

Wed, Aug 07 2013, 2:32 am

saw-- thank you, but I need someone local and I am not in NY or even close!

anonymous 1 and 2-- I said "very expensive" because I know that other places have decent houses for much less, but you are right about what we need. the way to really make big money is to own a lucrative business, not through a job. we started with jobs to fund our business and now do the business full time. it's 80% mazel, plus hard work and business aptitude. right place at right time sorta thing. never thought this would be my reality, but am very thankful BH.

a1mom- your advice rings very true. thank you.

↑ amother ↓

Wed, Aug 07 2013, 2:35 am

amother wrote:

OP here. I don't agree. I think it teaches them responsibility. I am happy to pay for their weddings and schooling through graduate school if that's their thing IYH, but after than they are adults and need to pull it together. We and all our siblings did. To give you context, we are not a kollel family, I know for others this is a priority and it takes all types so bless those who do.

↑ amother ↓

Wed, Aug 07 2013, 9:40 am

I agree with the op. Yes she can put them through school and pay for their weddings, however It's not her job to set them up for life. If they are old enough to be married then they are old enough to deal with their finances. I am someone who struggles financially and while my parents do help me a lot they did not buy me furniture let alone a house. I know people who have had everything handed to them on a silver platter and let me tell you they are so spoiled and expect everyone to give things to them. Is that the way op wants to raise her kids? I certainly and it doesn't sound like she wants too either.